State of N.Y. on Behalf of Bodnar v. Secretary of Health and Human Services

• Decision Date: 08 May 1990
• Docket Number: No. 790,D,790
• Citation: 903 F.2d 122
• Parties: , Medicare&Medicaid Gu 38,521 STATE OF NEW YORK, on Behalf of Margaret BODNAR, Appellee, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Appellant. ocket 89-6217.
• Court: U.S. Court of Appeals — Second Circuit

Page 122

903 F.2d 122

29 Soc.Sec.Rep.Ser. 550, Medicare&Medicaid Gu 38,521

STATE OF NEW YORK, on Behalf of Margaret BODNAR, Appellee, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Appellant.

No. 790, Docket 89-6217.

United States Court of Appeals, Second Circuit.

Argued Feb. 1, 1990.

Decided May 8, 1990.

Mark W. Pennak, Atty., Appellate Staff Civ. Div., Dept. of Justice, Washington, D.C. (Stuart M. Gerson, Asst. Atty. Gen., Frederick J. Scullin, Jr., U.S. Atty., and Anthony J. Steinmeyer, Attorney, Appellate Staff Civ. Div., Department of Justice, of counsel), for appellant.

Peter G. Crary, Asst. Atty. Gen. (Robert Abrams, Atty. Gen. of the State of N.Y., Peter H. Schiff, Deputy Sol. Gen., and Lenore B. Browne, Asst. Atty. Gen., of counsel), for appellee.

Before OAKES, Chief Judge, KEARSE, Circuit Judge, and FLETCHER, Circuit Judge. ^*

OAKES, Chief Judge:

Margaret Bodnar was seventy-seven years old when she was brought by ambulance and carried in by stretcher to the Helen Hayes Hospital in West Haverstraw, New York, on August 6, 1982. Having left the hospital only two weeks earlier, after recuperation from surgery and from an infection to her left hip, Bodnar was suffering from a painful and swollen left knee. She could no longer walk except in pain.

The Secretary of Health and Human Services decided that Bodnar had not been in need of hospitalization on August 6, 1982, and, on this basis, denied the hospital's later claim for Medicare reimbursement. By an order dated August 1, 1989, the United States District Court for the Northern District of New York, Con. G. Cholakis, Judge, reversed the Secretary's determination. The Secretary now appeals. We affirm.

FACTS

Bodnar initially entered the Helen Hayes Hospital to have part of her left hip removed on June 10, 1982. This surgery was followed by six weeks of hospitalization during which she received intravenous antibiotics to treat an infection in the same hip. When Bodnar left the hospital on July 22, 1982, she was able to walk with the assistance of a cane and without pain. She returned to her apartment where she lived alone. Just five days later, she awoke one morning to find her knee tender, painful, and swollen. The pain persisted for the next week. Finally, on August 6, 1982, she was brought by ambulance to the hospital.

The admitting doctor examined Bodnar and wrote:

Examination of the left knee shows no swelling with point tenderness over the medial tibial plateau. There is no ligamentous instability medial or lateral. There is no anterior cruciate instability. Range of motion of the knee, there is 110 [degrees] of flexion on the left knee which is painful at extreme.

A physical therapist examined her that same day. The therapist found that Bodnar had swelling from the left knee to the ankle, warm skin over the medial tibial plateau, red spots on the lower left leg, and could walk only in pain with the assistance of a crutch, and only for fifty feet.

The "admission diagnosis" recorded in handwriting on a hospital form was: "s/p Removal of Infected HWR (L) femur inability t[o] ambulate." Without the abbreviations, we take this to mean: "status-post removal of infected hardware from left femur--inability to walk." The "other diagnosis," as recorded on the hospital form, was "(L) knee sprain" or "left knee sprain."

Estimating Bodnar's hospital stay would last thirty-one days, Bodnar's attending physician, Dr. Bigliani, completed an admission request form certifying that inpatient hospitalization was necessary. Such certification is a prerequisite to payment under Medicare. See 42 U.S.C. Sec. 1395f(a)(3) (Supp. V 1987). The hospital's Utilization Review Committee (URC) also approved Bodnar's stay, at first only for eleven days until August 17, 1982, but later to August 26, 1982. The Medicare statute requires every hospital to create a URC composed of professional medical personnel to review inpatient admissions to determine whether they are compelled by medical necessity, and if not, to notify the patient, the hospital, and the attending physician of the URC determination. See 42 U.S.C. Sec. 1395x(k) (1982); Kraemer v. Heckler, 737 F.2d 214, 216 (2d Cir.1984) (discussing role of URC). The absence of a finding by the URC that further inpatient hospital services are not medically necessary is an additional prerequisite to reimbursement. See 42 U.S.C. Sec. 1395f(a)(6) (Supp. V 1987). The URC's "certification," combined with Dr. Bigliani's "certification," satisfied the "dual certification" prerequisite for Medicare reimbursement.

Bodnar had x-rays taken not only of her left knee but also of her left hip. Healing changes were noted in the hip. The knee was determined not to be fractured or dislocated. Rather, a spur had developed at the inferior portion of the patella. Over the coming days, she underwent intensive physical therapy for the knee and was released, able to "ambulate well," on August 16, 1982.

When the hospital requested Medicare reimbursement, the Health Care Financing Administration denied the request on grounds that Bodnar's treatment could have been provided on an outpatient rather than an inpatient basis. The Medicare statute provides that the Secretary may not make payments for "items or services ... not reasonable and necessary for the diagnosis or treatment of illness or injury." 42 U.S.C. Sec. 1395y(a)(1)(A) (Supp. V 1987). The State of New York, acting on behalf of the hospital, requested a hearing before an administrative law judge to appeal the denial of reimbursement. To aid in its review of the record, the judge contacted an independent physician, Dr. Boris J. Paul from the town of Guilderland, New York, to review the hospital records and to make a recommendation whether inpatient services were reasonable and necessary. Dr. Paul, who looked only at the records and did not talk with the attending physician or others at the hospital, responded with a one-page letter citing to excerpts of the hospital records and concluding that inpatient services had not been necessary. Accordingly, the administrative law judge issued a decision on May 16, 1986, denying reimbursement.

The State appealed to the Appeals Council of the Social Security Administration's Office of Hearings and Appeals. By letter dated July 8, 1986, the Appeals Council declined to review the decision of the administrative law judge. When the State filed for judicial review in the United States District Court for the Northern District of New York, the Appeals Council changed its position and requested a remand for it to reconsider its decision. On September 4, 1987, the Council affirmed the decision of the administrative law judge. Relying on a Health Care Financing Administration ruling providing that inpatient hospital care for rehabilitative services is "reasonable and necessary" only when a "patient needs a relatively intense rehabilitation program that requires a multidisciplinary coordinated team approach," see HCFAR-85-2 at 3, 50 Fed.Reg. 31,040 (July 31, 1985), the Council found that Bodnar's hospitalization had not been reasonable and necessary, because she was still able to walk limited distances--fifty feet with a cane--and the only rehabilitation prescribed for her after rest was walking around with a cane. The hospital again applied for review in the district court. The matter was referred to a magistrate who recommended reversing the Appeals Council on grounds that the "dual certification" of the attending physician and the URC as to the necessity of the inpatient services bound the Secretary to provide Medicare reimbursement. On August 1, 1989, the district court adopted this conclusion of the magistrate and also held, in the alternative, that the decision of the Appeals Council was not supported by substantial evidence.

On this appeal, the Secretary contends, first, that the dual certification of an admitting physician and the URC do not bind him to provide Medicare coverage and, second, that substantial evidence supports his decision to deny coverage in this case. We agree that dual certification does not bind the Secretary, but nevertheless find that substantial evidence does not support his decision. We therefore affirm.

DISCUSSION

As noted, the Secretary may not provide reimbursement for items and services that are "not reasonable and necessary" for diagnosis or treatment of illness or injury. See 42 U.S.C. Sec. 1395y(a)(1)(A). ¹ In determining whether services rendered are "not reasonable and necessary," we have no doubt that the Secretary may take into account not only what kind of services were provided, but also where those services were provided, i.e., whether those services were provided in the most appropriate, cost-effective setting. See HCFAR-85-2 at 3, 50 Fed.Reg. 31,040 (July 31, 1985) ("It must be reasonable and necessary to furnish the care on the inpatient hospital basis, rather than in a less intensive facility, such as a SNF [skilled nursing facility], or on an outpatient basis."); Lerum v. Heckler, 774 F.2d 210, 214 (7th Cir.1985). But see Hultzman v. Weinberger, 495 F.2d 1276, 1282 (3d Cir.1974) (holding that section 1395y(a)(1) does not authorize Secretary to exclude from coverage services that are reasonable and necessary solely because they could have been provided on an outpatient rather than inpatient basis).

1. Whether the Secretary Is Bound by Dual Certification

The State of New York contends that the Secretary is bound to provide reimbursement when "dual certification" is made by the attending physician and the URC. The district court in this case and other district courts in this circuit have found dual certification binding on the Secretary. See State of New York ex rel. Johnson v. Secretary of Health and Human Servs., No. 86-CIV-639 (N.D.N.Y. Mar. 1, 1989) (1989 Westlaw 19607); Israel v. Secretary of Health and Human Servs., 669 F.Supp. 61, 63 (W.D.N.Y.1987); Walsh v. United States Dep't of Health and Human...